10-11-07 Section_351outline

10-11-07 Section_351outline - 1 Section 351 Rationale An...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Section 351 Rationale An exchange, but a mere change in form. The taxpayer is dealing with himself or herself. A deferral, not tax forgiven. Neutralize the tax laws regarding choice of entity. Uses Incorporate a proprietorship or partnership. Pooling of assets by more than one taxpayer. o (But not in the case of two or more corporations) Parent creates a subsidiary. Requirements Transfer of property. In exchange for stock. Control (80%) by the property transferors immediately after the transfer. Compared to section 721. Results Nontaxable (no gain or loss ) to the corporation and the shareholder, if no boot received by the shareholder. Basis carryover. o Corporation’s basis in the property is the shareholder’s basis. o Shareholder’s basis in the stock is the shareholder’s basis in the property transferred, less liabilities assumed by the corporation. Gain recognized if boot received (with concomitant bases adjustments). The corporation’s assumption of liabilities is not boot received by the shareholder, but gain is recognized if liabilities exceed basis. Exceptions - investment companies, stock for debt in bankruptcy, certain (i.e., redeemable) preferred stock received for property. Relevant Code Sections Section 351 (page 24 of Code material), Section 351(b) – gain from boot but no loss. 368(c) (page 34) - control 357 – treatment of liabilities assumed or property taken subject (no chain of liability reasoning), 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
358 – the shareholder’s basis in the stock received (basis in assets –liabilities) 362 – the corporation’s basis in the property received. Section 351 and Boot Realized gain recognized to the extent of boot received. An installment note received by the transferor-
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/18/2008 for the course ACIS 5324 taught by Professor Weseago during the Fall '07 term at Virginia Tech.

Page1 / 4

10-11-07 Section_351outline - 1 Section 351 Rationale An...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online